"First off, it is doing damn well as a hotel," Vornado CEO Steven Roth said Tuesday during a conference call with investors.

Indeed, the 1,700-room lodge that Vornado previously described as "a placeholder, sort of like a parking lot," brought in nearly $38 million in 2007, as The Observer earlier reported. (That’s $10.5 million more than in 2006.)

Imagine how much the run-down hotel might make after a significant renovation, which Vornado is now apparently considering.

“We have two basic grand strategies with this grand asset," Mr. Roth said. "One is, leave it as a hotel, renovate it as a hotel, increase the income coming out of the hotel, and you introduce a very substantial amount of retail in the base of that building—probably three floors worth, and connect it into the Manhattan Mall, so we have an extraordinarily interesting asset."

Of course, the "other opportunity," as Mr. Roth put it, would have Vornado stick to its guns, raze the building and build a huge tower — "if we can land a major tenant," he added. (Above is a new rendering of what that tower would look like.)

Vornado was reportedly wooing Merrill Lynch to the site, but the financial giant ultimately decided to stick around the Financial District.